Thursday, December 04, 2008

Cost of Jobs Bank 2005-2008: $4,200,000,000

FLASHBACK to October 2005:

DETROIT NEWS -- The jobs bank was established during 1984 labor contract talks between the UAW and the Big Three. The union, still reeling from the loss of 500,000 jobs during the recession of the late 1970s and early 1980s, was determined to protect those who were left. Detroit automakers were eager to win union support to boost productivity through increased automation and more production flexibility.

The result was a plan to guarantee pay and benefits for union members whose jobs fell victim to technological progress or plant restructurings. In most cases, workers end up in the jobs bank only after they have exhausted their government unemployment benefits, which are also supplemented by the companies through a related program. In some cases, workers go directly into the program and the benefits can last until they are eligible to retire or return to the factory floor.

By making it so expensive to keep paying idled workers, the UAW thought Detroit automakers would avoid layoffs. By discouraging layoffs, the union thought it could prevent outsourcing. That strategy has worked but at the expense of the domestic auto industry's long-term viability (MP: That's why they're now asking for a handout/bailout). American automakers have produced cars and trucks even when there is little market demand for them, forcing manufacturers to offer big rebates and discounts (MP: another reason the Big 3 has been losing money and needs a handout).

"Sometimes they just push product on us," said Bill Holden Jr., general manager of Holden Dodge Inc. in Dover, Del., who said this does not go over well with the dealers. "But they've got these contracts with the union."

In Detroit's battle against Asian and European competitors that are unencumbered by such labor costs, the job banks have become a major competitive disadvantage (MP: And explains why the Big 3 is asking for a handout/bailout).

Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the size of the expense.

According to those documents, GM agreed to contribute up to $2.1 billion over four years. DaimlerChrysler set aside $451 million for its program, along with another $50 million for salaried employees covered under the contract. Ford, which also maintained responsibility for Visteon Corp.'s UAW employees, agreed to contribute $944 million. Delphi pledged to contribute $630 million. (See chart above, showing the $4.2 billion total cost of the jobs bank.)


DETROIT NEWS -- Local leaders of the United Auto Workers agreed to suspend the program where laid-off workers can get up to 95% of their wages and benefits, a concept that came to symbolize the stereotype of overpaid, underworked factory workers.

Local leaders agreed on Wednesday to immediately suspend the jobs bank, which has 3,542 workers. Suspending the program just as the automakers prepare to eliminate more workers also prevents the newly laid off from joining it in the months ahead, company officials said.

said the jobs bank -- something the union has defended steadfastly in the past -- has become a lightning rod since congressional hearings two weeks ago. Top UAW officials and staff must now meet with automakers to work out the removal of workers in the jobs bank


1) Is it any wonder that: a) "Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending," and b) the Big Three is now asking for a bailout after spending more than $4 billion on an outdated "jobs bank" program over the last four years?

2) If the Big Three hadn't wasted an estimated $4 billion from 2005-2008 paying idled "workers" not to "work," what could they have done with that money? Well, they could have produced about 200,000 cars at an average cost of $20,000 or built 8 new factories at an average cost of $550 million.

3) Speculation: Without the burden of the jobs bank, and the $4.2 billion estimated cost of the jobs bank over the last four years, the Big 3 wouldn't be begging for a handout today. Even if the hourly wages of the Big Three are now comparable to wages at Toyota and Honda, and even if the productivity gap has narrowed, the cost of the job banks to Big Three is probably one of the biggest factors contributing to their competitive disadvantage and one of the biggest reasons they are facing bankruptcy today.

If the UAW had agreed five years ago to end the jobs bank, the Big Three wouldn't be in so much trouble today, and wouldn't be in D.C. today begging for a handout.


At 12/04/2008 11:06 PM, Blogger said...

$4.2 billion is a BIG number.

I mean, that's half way to a bridge loan for one of these giant domestics...


At 12/04/2008 11:11 PM, Blogger wcw said...

MP, why is it that in your world management never, ever bears culpability for signing deals -- ever?

At 12/05/2008 12:22 AM, Blogger OBloodyHell said...

> MP, why is it that in your world management never, ever bears culpability for signing deals -- ever?

Detroit automakers were eager to win union support to boost productivity through increased automation and more production flexibility.


I think that the automakers tend to be at a disadvantage when it comes to the UAW -- Unless the demands are outright insane, they are generally better off letting them have what they want. A strike just isn't worth the trouble for all involved.

At 12/05/2008 12:42 AM, Blogger wcw said...

Nobody ever put a gun to the automakers heads and made them sign a deal. If they signed it, they own it. And since they own it, the Jobs Bank and retiree heathcare and anything else that gets MPs panties in a wad lands at a single door: automaker executives.

The nice thing is, there is a counterexample: Toyota. Who hasn't layed anyone off, pace contract workers -- ever.

At 12/05/2008 1:35 AM, Anonymous Anonymous said...

Nobody ever put a gun to the automakers heads and made them sign a deal.

In what sense does the threat of strike, and the inability under the law to refuse to negotiate with a union, differ from a gun to the head?

At 12/05/2008 6:22 AM, Blogger Plamen said...

wcw, maybe not a gun to the head, but slashing tires, keying cars, and anonymous threats of physical violence to workers by union members were pretty common. That is not to say that you do not have a point - management could in theory have taken a tougher stand. In practice, that would have led to crippling strikes, and eventually to management's replacement with a more malleable one.
And another "gun to the head" - The Big Three management has to negotiate with UAW as if it represents every worker - because a worker has no option not to join UAW upon being hired, and must pay for the "privilege".
In a reasonable universe, where at-will employment is the rule, you'd be right - contracts must be enforced. Even under the law, however, contracts signed under duress are void. In that universe, a strike would also involve workers just not showing up for work - not picketing.

At 12/05/2008 6:57 AM, Blogger Plamen said...

A little addendum: a perspective on working with and without unions.

HT: Eric Falkenstein

At 12/05/2008 7:37 AM, Anonymous Anonymous said...


The Japanese transplants keep core workers in the plant when the production lines are not running. They attend training sessions and other duties. They don't lay off their core workers because they carry a mix of core workers and contingency workers. When production stops or slows, the contingency workers are reduced or eliminated. The Japanese have their version of a less-transparent jobs bank.

I correspond weekly with one of my former management partners who left GM for a Southern transplant. Their operations and processes are a lot closer to ours than many believe. In fact, we flat-out kick their ass in OSHA recordables with our excellent safety and ergonomic programs. What good is a job if you can’t walk out everyday with the use of all of your body parts? Somebody will be paying large amounts of money when the transplant workers start retiring after being worn out by their employers; that cost will be dumped on society.

The jobs bank is a Japanese business model of lifetime employment to reward their loyal workers. Although it served a purpose when the industry was cyclical, it does not work well in a permanent downsizing. It could be argued UAW workers stimulated the economy with the jobs bank pay—it was not stuffed into mattresses. Much of the money would have had to been replaced by government funds from the taxpayers. Do you own a store, provide insurance, teach a college course, or provide any other service or product to consumers? Look closely, you might have some of that money in your pocket vicariously. Now, the $2 billion spent on Fiat is another story. Where’s that money?

Plamen. NO ONE is forced to belong to a union ANYWHERE in the U.S. You can ALWAYS sign out. Here’s a source from Wikipedia, but you can Google it yourself if you do not believe me: “Under the National Labor Relations Act, the union may only require that employees either join the union or pay the equivalent of union dues. Nonmembers who object to that requirement may only be compelled to pay that portion of union dues that is attributable to the cost of representing employees in collective bargaining and in providing services to all represented employees, but not, with certain exceptions, to the union's political activities or organizing employees of other employers.” [emphasis added]

At 12/05/2008 8:06 AM, Anonymous Anonymous said...


A lot of people do not survive on their people-pleasing skills or their value to the employer in a free market. C.E.O.s and sports stars have employment contracts. Teachers and professors have tenure. Thousands of people have signed employment contracts with job-protection provisions. Ask yourself this question: Can my employer release me tomorrow for any reason at all except discrimination? If the answer is no, you are not an “at will” employee, and you enjoy union-like protections. To think or say otherwise is delusional or duplicitous.

At 12/05/2008 9:50 AM, Blogger RebelRenegade said...

So you're not forced to join the union, only to pay the union dues.

Well that sounds COMPLETELY different.

At 12/05/2008 11:32 AM, Blogger sethstorm said...

Fine, drop it.

But unless the transplants start making Detroit style cars, I'll buy GM and such until they no longer exist in physical form.

Remove the unionbusters long-term if you want to remove the UAW. No more, no less.

At 12/05/2008 11:39 AM, Anonymous Anonymous said...


The fact is, as defined by law, nobody has to join a union as a condition of employment. So, usage of the term "forced unionism" is a sensationalistic ploy meant to play on emotions. Some states allow free-riders to receive representation and benefits from unions without paying for them. Those states are called “right-to-work” states.

Whether one cares for unions or not, the facts should not be distorted. Very few people above entry-level jobs are “at will” employees who have to wonder if they will be let go from their jobs tomorrow, absent downsizing, without some type of due-process protection. Anyone seeking to destroy unions should tear up their employment contracts or resign their tenure if they feel that strongly anti-union; however, I sincerely doubt that will happen. Some people ardently aspire to keep their own job protections while denying the same security to others.

At 12/05/2008 11:41 AM, Blogger sethstorm said...

Walt G.:
Continue to fight the good fight.

Irrational hate unfortunately still exists from an era where they could easily scapegoat unions.

I may not be a member of one, but recognize they still have a place in this century. However, there are some who still think it's the 1980's.

At 12/05/2008 12:28 PM, Blogger Marko said...

Umm, Walt, maybe that is true in Right to Work states, but not in other states. Otherwise, what is the point of Right to Work laws?

If unions are so great, why does it take the power of the government to ram them down our throats? If we got rid of the NLRB and all the union laws, then workers would be free to organize and bargain, and employers would be free to fire them. Like in most jobs.

At 12/05/2008 12:45 PM, Anonymous Anonymous said...

Marko--Forced unionism is against the law in ALL states. It's clearly spelled out in the "union security clause" of the National Labor Relations Act.

Right-to-Work should be called right-to-not-be-forced-to-pay union-dues. If you opt not to join a union you cannot be forced to pay any union dues even if a union is voted in and you benefit from a collective agrreement in your workplace.

Unionized employees get fired, for cause, everyday. Proper hiring practices solves a lot of problems. Unions hire very few employees and have little input in the hiring process outside of the construction industry--unions work with what they are given by management.

At 12/05/2008 2:05 PM, Blogger Marko said...

In our union locations, we often have a great deal of trouble terminating union employees, even when we have video surveillance of them stealing, or witnesses to say they used racial epithets. To be honest, I find it shocking that anyone would really defend unions at this point, after what I have seen!

At 12/05/2008 2:08 PM, Blogger American Thinker Fan said...

Walt G

A few points:

I would fully expect the "Big Three" to do better on recordables. Employees actually doing work have a greater chance of injury than guys who don't do anything.
OSHA has stats which show minimal injuries for guys sitting all day drinking coffee.

What do you have against companies that expect their employees to actually work ( that's called producing products for sales)?

So what exactly is the grammatical difference between "forced" and "compelled"?

At 12/05/2008 2:28 PM, Anonymous Anonymous said...

marko: I'm not defending unions. I'm defending your right to belong to one or not. It should be your choice, and your choice alone. Big shots have people bargain for them, so why shouldn't the average worker have the same advantage?

American Thinker Fan: The Harbor Report, an expert auto industry analysis, does not show evidence of much difference between worker hours to make cars nowadays.

Forced means you have to do something. Compelled means you have to have balls to stand up for your convictions. You got any?

At 12/05/2008 5:26 PM, Blogger Marko said...

Walt, I will grant you that. Employees should have a right to join a union, just like any other type of private association. I am just arguing that the federal government should not be supporting such unions with special protections like those found in the NLRA. Sink or swim, I say.

The one place where I kind of support unions is for government employees. The government doesn't have market incentives to treat their employees well. Of course, I don't think teachers should be government employees, so it gets a bit confusing . . .

At 12/05/2008 6:56 PM, Anonymous Anonymous said...

Marko, the corporate law books are much thicker than the labor law books. Should laws favoring corporations be abolished as well?

I support unions where the people want them. To me that's freedom. I've worked both union and non-union jobs throughout my life, and I've done fairly well at both.

I don't think the business model that worked for the 20th century will work in the 21st century with the globalized economy. The 2007 UAW/GM agreement changed a lot more than most people are giving it credit for. This recession exacerbates the problem that was on its way to being solved. Very few people or companies can handle a 40% drop in revenue or income without serious repercussions.

Additionally, the jobs bank figures mentioned in this post was not money actually spent but a money cap. If you read the contracts back to 1984, you can see each contract simply replenished the jobs bank fund each contract. Usually only about 1/3 of the cap was needed to bring it back up to the maximum cap. These types of funds tend to have a lot of administrative costs and unrelated transfers made from them for joint union and management pet projects. Nobody will ever be able to figure out how much of the money actually ended up in the employees' pockets, but whatever did was probably primarily spent at your local merchants. Chances are, some of it passed through your hands.

At 12/06/2008 1:35 AM, Blogger Plamen said...

Walt G.:

Firstly, I do happen to work in a small business, where anyone can indeed be fired at anytime or resign at anytime, and I quite love it. Yet, no one has ever been fired there; one guy with clear interpersonal issues was asked to start looking for another job, but he cleaned up his act.

Secondly, I stand corrected - so I can choose not to be a part of the union... except I really cannot - I am forced to pay it. And of course no informal pressure will be heaped upon me, after joining, to reconsider, I assume? And I will not even go into the "with certain exceptions" of the quote you provided - meaning, in some cases, I would indeed have to pay for the union's political campaigning.

At 12/06/2008 3:13 AM, Blogger OBloodyHell said...

> NO ONE is forced to belong to a union ANYWHERE in the U.S.

Oh, horsepuckey. You're playing with terminology, not factual reality.

I recall a relative of mine with experience driving a truck, working in the Tri-State area. He was on a job site doing construction labor. A truck needed to be moved 100 feet to a different location. The entire construction crew sat on their asses for several hours while a "Union Trucker" (the relative was not a *member* of the Union in that state) was brought to the site to move that truck all of 100 feet, despite the fact that at least one person (that relative) with the necessary knowledge to move the truck a short distance was standing right there all along.

And, further, if what you claim was true, then WHY do the Big 3 make deals with Unions at all? Are you seriously suggesting that they can't find anyone (i.e., "scabs") who will take the place of the workers during the course of a long strike who can't do the job -- certainly by the end of a long strike -- who AREN'T union?

Your claim is obvious crap, Walt..

At 12/06/2008 3:34 AM, Blogger OBloodyHell said...

> Should laws favoring corporations be abolished as well?

Since many of them are designed to favor one or more corporations over the others, I believe the phrase "Fuckin' DUH?" carries the right degree of snark?

Most law, walt, is anticompetitive. The first thing any organization does when it gets power is to misuse that power to restrict any other threat to that power.

This goes for unions AND corporations.

You should be able to challenge a law -- as an individual -- on the basis that it is essentially anticompetitive.


LOL: The word verification is "shunarsa". Good advice, that.

At 12/06/2008 12:01 PM, Anonymous Anonymous said...


Which claim? If it's this one, I'll repeat what I said earlier, you can't legally be forced to join a union (see the cite below). You can also look up NLRB v. General Motors (1963) for more support. Can you provide something that proves otherwise?

"In Communications Workers v. Beck, 487 U.S. 735 (1988), the Supreme Court held that a collective-bargaining representative under the NLRA may not charge an objecting nonmember covered by a contractual union-security clause for union activities unrelated to collective bargaining, contract administration or grievance adjustment. In ALPA v. Miller, -- U.S. --, 158 LRRM 2321 (May 26, 1998), the Supreme Court recently held that agency fee objectors under the Railway Labor Act could not be required to exhaust union-established arbitration procedures before bringing their fee disputes to federal court. This Memorandum is intended to provide guidance on the processing of unfair labor practice charges alleging that unions have improperly charged objectors for nonrepresentational activities, in light of ALPA v. Miller."

Any job-site manger who let his or her workers sit because a truck needed to be moved should be fired. Unions cannot solve piss-poor decisions from their supervisors. The standard procedure in that case is to have the truck moved by a legally trained and licensed worker (state licensed and OSHA trained). The time that the worker spent moving the truck is timed, and a grievance is filed for that amount of time. That grievance is stacked together with many more grievances like that one and a percentage of pay is later agreed upon at a settlement meeting (usually 50%). The grievance and settlement would look something like this: Time spent moving the truck: 15 minutes (rounded up the ¼ hour). Truck driver hourly pay: $30. Grievance: 30/4 = $7.50. Settlement: 50% of $7.50 = $3.75. Why would any prudent manager let his or her employees sit for $3.75? I know what I am talking about—I’ve seen hundreds of these. You can’t legally (per the NLRA ruling) file a grievance for more than the loss. It's also considered extortion. Whether a grievance would have even been filed would is questionable—that depends on the union’s strategy and attitude toward the particular company and job-site manager.

If the job-site manager did not have a qualified worker to move the truck on the job, then his or her boss should be fired, too. All the workers needed to safely and properly perform a job should be on the job site. That’s where training comes in, and a lot of employers do not want to pay for that because they have to carry excess manpower to pull a worker off the job for training (Disclaimer: I’ve trained union workers). Cutting corners or poor management decisions causes problems that unions should not take the blame for.

At 12/06/2008 1:05 PM, Anonymous Anonymous said...


The dynamics at a small company and huge conglomerate are completely different. A small company probably does not have a supervisor who does not have the company’s best interest in mind. I’ve dealt with supervisors who attempted to fire valuable employees because they had a hangover that day, didn’t get laid the night before, or the employee would not “loan” them money. No, I’m not kidding.

All employees deserve the same job security that those with employment contracts and tenure enjoy. I’ve included a paper for those who would like to sign it and give it to their place of employment to be placed in your employment file. If you really want to be an at-will employee, give it a try, and put your money where you mouth is. It’s modified from one I sign every six months. Just cut-and-paste it into a Word document. I'm not a lawyer, but be warned, this was presented to me as a legally binding contract.

Notwithstanding anything else in this employment agreement or in the employee handbook to the contrary, I wish to be an at-will employee. I may terminate this employment agreement upon 14 days notice. The employer may terminate this employment agreement, with or without cause, upon 45 days notice.

If the employer chooses to terminate this agreement and does not give notice, the employee will receive 10 days pay. If the employer chooses to terminate this agreement and does not give notice, an employee who has been employed full time by the employer for more than 12 months, will receive 45 days pay.

Employee's Signature _____________________________


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